When Jim Angelus first applied to the now $669 billion forgivable Paycheck Protection Program, he thought it would offer his restaurant business a lifeline after he shuttered it on March 15 because of the pandemic. Now after a month of waiting, and as the country seems no closer to resolving the pandemic, he's wondering whether he should have even applied.

"It's creating this new anxiety: Do we use it? How do we use it? And what are the next steps?" says Angelus, the co-owner of Kezar Bar & Restaurant in San Francisco's Cole Valley. He was notified in early May that he was approved for a $129,000 PPP loan from Bank of America, but that was well after he furloughed 18 staffers and effectively sidelined the business. Kezar still does food for pickup one night a week. Revenue, Angelus adds, has collapsed to a small fraction of what it was this time last year.

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If Angelus were to follow the letter of the law, he would need to immediately rehire his staff, and pay them for the next eight weeks regardless of whether he can put them to work. 

"The numbers just don't work for restaurants," says Angelus, who anticipates lower demand for eating out well after California's stay-at-home order lifts. "It's not like we can open back up and use all of our labor force. To have the loan forgiven, we'd have to spend 75 percent of the loan--or the amount we use--on labor, and when you're operating at like 10 percent of your normal output, it doesn't work."

Countless business owners are in a similar situation. They've landed federal stimulus money through the PPP only to now question what to do with it. Some are realizing the challenges of meeting the demands of the potentially forgivable loan, while others say the program's changing requirements are forcing them to rethink their participation.

"It's the Wild West," says Shauna Zobrist, a CPA at Breakaway Bookkeeping and Advising, a virtual network of bookkeepers and advisers in Portland, Oregon. "We're getting new guidance every day." Indeed, The Wall Street Journal estimates the program has seen nine different "interim final rule" changes and more than 40 pieces of new guidance since the PPP kicked off in early April. 

Second Thoughts

Zobrist says about 60 of her clients are now struggling with what to do about their PPP loans--including a Tualatin, Oregon-based construction business owner, whose lender recently advised him he might need to return his loan. The company, whose owner asked to remain anonymous for fear of drawing the ire of the U.S. Small Business Administration, isn't currently suffering because of the coronavirus, as it has been finishing orders from earlier this year. Of course, at the time the owner applied for the PPP, he needed only to show the uncertainty due to the shutdown could lead to financial distress.

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"We decided that he's using it in good faith, the way the program has designed," says Zobrist. "So he's keeping the money."

Beret Kirkeby, the owner of a small orthopedic massage clinic in New York City, is considering returning her PPP loan for altogether different reasons. Because of the overwhelming confusion around how to apply, Kirkeby--who is nine months pregnant and has a 17-month-old at home--says she went into a tailspin after learning that her existing lender, Bank of America, hadn't processed her loan, weeks after she thought she had applied. She then tried applying with several fintech companies, whose online applications, she says, wouldn't allow her to add her own salary to the calculation used to determine the loan amount.

On May 6, Kirkeby says, the money finally hit her account from PayPal's banking partner, but it wasn't enough to cover her salary and that of her employees--much less pay for the lease on her space in Midtown Manhattan. She says she had 14 employees before the crisis, and now they're all on unemployment. "I am terrified of this money," says Kirkeby, who is fearful of the PPP turning into a loan--even though it carries a 1 percent interest rate. "I would rather be destitute than in debt," she says. 

An Action Plan

In the absence of formal rules governing forgiveness--and to avoid getting dinged for fraud down the line--Zobrist advises business owners to operate within the intent of the law. "That's the key planning piece for my clients right now: How do they spend the money the wisest way and also get the money forgiven if they can?"

Within these confines, however, it is possible for business owners to adapt their PPP to an extent, says Zobrist. For one thing, you should first realize that allowable expenses and forgivable expenses are not mutually exclusive. Allowable expenses, which include payroll, rent, mortgage interest payments, and some utilities can be forgiven if you apply PPP funds toward them within the eight-week covered period. Even if you don't spend all of your PPP in that timeframe, however, those expenses are still allowable; they just won't be forgivable. In other words, she says "you can use the money to pay people later, but you can't get it forgiven." 

Josh Knauer, general partner at JumpScale, a Pittsburgh-based business advisory firm that's helping clients with their PPP needs, further suggests that owners who want more flexibility should start getting comfortable with thinking of their PPP as a loan rather than a grant. In effect, once you take the forgivable part out of the equation, you're left with a loan that can be used more freely and that comes with pretty generous terms, like a 1 percent interest rate, no fees, and a six-month payment deferment.

The thing to watch out for, says Knauer, is making sure you keep separate accounting for how you're spending that money. Most businesses, he adds, should work with a bookkeeping or accounting professional to ensure they correctly categorize and track their expenditures. Naturally, you should aim for your loan to get forgiven, he says, but you shouldn't necessarily sweat it if it isn't. "Very few businesses are going to have 100 percent of their loans forgiven."

Even so, that might be enough of a risk for business owners on the edge to return the money. The SBA and Treasury Department guidance out yesterday gives business owners safe harbor to return funds by May 18. Additionally, there are no prepayment penalties for those who wish to pay their loan off early even after this date.